Manton & Ors v Manton

The court may remove a trustee where continued office would impede the proper administration of the trust or harm the beneficiaries’ interests. Actual misconduct or proved financial loss is not essential. A trustee’s participation in a competing business may create an immediate fiduciary conflict and a substantial risk to trust property. Friction alone is insufficient, but hostility justifies removal where it creates a real risk that the trust cannot be administered effectively. The relevant interests are those of the beneficiaries as a class.

The claimants, who were fellow trustees and family members, sought the defendant’s removal as trustee of a discretionary family trust. The trust indirectly owned a substantial interest in companies operating an exhibition-stand business. Following a family dispute, the defendant established and operated a competing company which obtained substantial business from former customers of the trust-owned business.

The issues were whether the defendant’s competing activities created a fiduciary conflict, whether they endangered the trust property, and whether the resulting hostility and practical difficulties justified removal despite the absence of established financial loss.

1. Removal jurisdiction. The court possessed an inherent jurisdiction to remove a trustee, in addition to the statutory power under Trustee Act 1925, s 41. The governing consideration was the proper execution of the trusts and the welfare of the beneficiaries as a whole. Actual misconduct was not required, although material misconduct would strongly support removal.
2. Conflict of interest. The defendant’s involvement in a company directly competing with the trust-owned business placed his personal interests in conflict with the interests of the trust beneficiaries collectively. The conflict arose immediately and did not depend on proof of actual loss. The risk that business would be diverted from the trust-owned company, and the damage and mitigation costs resulting from that diversion, were sufficient to endanger the trust property.
3. Practical administration. The conflict materially restricted the trustees’ ability to discuss commercially sensitive matters, consider claims against the defendant and obtain or share information relevant to the trust’s investments. The defendant’s position also enabled him to prevent unanimity on proposed action concerning his own conduct. It was unrealistic to treat the affairs of the trust and its closely connected companies as capable of complete separation.
4. Hostility. Personal hostility did not by itself justify removal. Here, however, the hostility was implacable and carried a real risk of impairing the trust’s administration. The defendant’s expressed intention to maintain the conflict until threatened claims were withdrawn further demonstrated that his personal interests were being placed ahead of the beneficiaries’ collective interests.
5. The defendant’s proposed relocation and stated intention to cease trading in the exhibition sector did not remove the risk, since the evidence did not establish that the competing business had permanently ceased or that customers had been referred back to the trust-owned business. Judgment was therefore given for the claimants and the defendant was removed as trustee. No additional independent trustee was required as a condition of removal.